Which Stocks Look Ready to Surge and Sink with Earnings Next Week?

Indie Research

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, BullMarket.com publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, BullMarket.com used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including NetApp (NTAP), Home Depot (HD), Hewlett-Packard (HPQ), Best Buy (BBY), Toll Brothers (TOL), Target (TGT), Dollar Tree (DLTR), Abercrombie & Fitch (ANF) Dick's Sporting Goods (DKS), and Salesforce.com (CRM).

Here is just a tiny sample of what BullMarket.com wrote about Best Buy:

Best Buy has beaten analyst EPS estimates four of eight quarters over the past two years, missing the consensus four times. During that span, the stock has risen the next session three of eight quarters. Seasonally, the stock has risen twice in the past four years.

Last quarter, the company reported better-than-expected Q4 results. Best Buy said its loss after paying preferred dividends for the three months ended February 2nd totaled -$409 million, or -$1.21 per share. It lost -$1.82 billion, or -$5.17 per share, a year earlier.

Adjusted to exclude restructuring and other one-time costs, EPS came to $1.64, which was above the $1.54 per share Wall Street expected.

Revenue was nearly flat at $16.71 billion, compared to $16.67 billion last year. Analysts expected a decline to $16.29 billion.

Sales on a same-store basis in the U.S. improved by 0.9%, helped by performance from Best Buy's standalone mobile stores. International same-store sales fell -6.6% due to weak results in Canada and China.

Best Buy booked restructuring charges of -$203 million related to closing stores and severance. It took an -$822 million impairment charge to write off worse than expected results in Canada and China, plus -$44 million in asset impairments.

Adjusted free cash flow for the year reached $965 million, as Best Buy reduced inventories and focused on working capital and cash flow management. It ended the year with $1.8 billion in cash. ...

Outside of earnings, there are a lot of issues swirling around Best Buy. The company has been hurt by the "showroom" effect that leads some customers to browse in its stores but buy elsewhere, often online. The home electronics industry has also suffered from a lack of "must-have" products to drive traffic and sales. More aggressive pricing to protect market share, including a price matching guarantee, meanwhile, have hurt margins.

On the bright side, the company has been able to remain solidly free cash flow positive. It also recently sold its 50% stake in Best Buy Europe for $775 million, which looks like a good price.

Talks with former CEO and founder Richard Schulze, who had been kicking the tires in an attempt to purchase the company in a leveraged buyout, are dead, and he is now Chairman Emeritus. ...

The full BullMarket.com earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls BullMarket.com made for Q1 so far were:

  • to be bullish on Green Mountain (GMCR) ahead of earnings.
  • to be bearish on Deere (DE) ahead of earnings.
  • to be bullish on Netflix (NFLX) ahead of earnings.
  • A daily investment service that is committed to creating long-term wealth for its members, BullMarket.com's Recommended List of stocks is up 104.9% from 2009-2012 versus a 57.9% return for the S&P, a 47.0% outperformance, topping the benchmark each year since the start of the Great Recession. Subscribers receive actionable market commentary, access to 40+ stock ideas on the Recommended List, and real-time trade alerts. Plus, sign up for a free trial today to view Bull Market's in-depth Special Reports - including its annual High Yield and MLP reports - and its timely Earnings Previews, which are published every Friday during the heart of earnings season. Get a Risk-Free Trial to Bull Market Today! (Please note returns are unaudited.)

    View Comments (0)